Hua Hong Semiconductor : Reports 2020 Second Quarter Results

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Stock Code (1347)

News Release

Hua Hong Semiconductor Limited

Reports 2020 Second Quarter Results

All currency figures in this report are in US Dollars unless indicated otherwise. The consolidated financial statements are prepared in accordance with HKFRS.

Hong Kong Special Administrative Region of the People's Republic of China - August 11, 2020.

Hua Hong Semiconductor Limited (SEHK: 1347) (the "Company"), a global, leading pure-play foundry, today announced its consolidated operational results for the quarter ending June 30, 2020.

Second Quarter 2020 Highlights (Unaudited)

• Revenue reached US$225.4 million, 2.0% lower than the prior year but 11.1% over the prior quarter.
• Gross margin was 26.0%, 5.0 percentage points below 2Q 2019 and 4.9 percentage points above 1Q 2020.
• Net profit was US$1.3 million, compared to US$49.9 million in 2Q 2019 and US$2.7 million in 1Q 2020.
• Net profit attributable to shareholders of the parent company was US$17.8 million, compared to US$43.4 million in 2Q 2019 and US$20.3 million in 1Q 2020.
• Basic earnings per share was US$0.014, compared to US$0.034 in 2Q 2019 and US$0.016 in 1Q 2020.
• ROE (annualized) was 3.2%.

Third Quarter 2020 Guidance

• We expect revenue to be approximately US$236 million.
• We expect gross margin to be in the range of 22% to 24%.

1

President's Message

Mr. Junjun Tang, President and Executive Director of the Company, commented on the second- quarter results:

"We are very pleased with Hua Hong Semiconductor's performance in the second quarter of 2020, where both sales and gross margin exceeded guidance. The trough in the first quarter is now behind us. The global semiconductor market continues to exhibit signs of recovery, especially in the Chinese market. Driven by market demand for IGBT, super junction, MCU and CIS products, revenue increased to $225.4 million in the second quarter, with double-digit growth quarter-on-quarter. At the same time, our gross margin increased 4.9 percentage points quarter-on-quarter to 26%, thanks to a higher utilization rate and improvement in product mix."

"Due to the tremendous interest and support for our Wuxi 12-inch project from our customers and partners and the emergence of excellent domestic design companies, the plans for our new 12-inch fab have been accelerated. While ensuring high-yield shipments of existing products, we are advancing certification of multiple technology platforms offering diversified and comprehensive solutions to our customers. Smart card chips, power discrete, and CIS products were delivered to customers first. In the second half, IGBTs, super junctions, and other products will be shipped in succession to meet the needs of emerging markets, such as new energy vehicles."

"The pandemic has not been contained. Guided by 'protect yourself, protect family members, protect Hua Hong people, and protect Hua Hong', we are committed to prevention measures. Maintaining close communication with our domestic and foreign suppliers, we continue to expand our markets and increase cooperation, insuring the company's long-term development. I would like to thank our shareholders, customers, and suppliers for their support and our employees for their unremitting efforts to overcome challenges. Looking forward, we hope the pandemic will be over soon. We are confident in our ability to take advantage of every opportunity and are working hard for another successful half."

2

Webcast/Conference Call Announcement

Date: August 12, 2020 (Wednesday)

Time:04:00 P.M. (Shanghai and Hong Kong)

04:00 A.M. (New York, Wednesday, August 12, 2020)

Presenters: Mr. Junjun Tang, President and Executive Director

Mr. Daniel Wang, Executive Vice President and Chief Financial Officer

Webcast: The call will be webcast live with audio and slides at:

http://www.huahonggrace.com/html/investor_webcast.phporhttps://engage.vevent.com/rt/huahongsemiconductor/index.jsp?seid=140(note:

registration is required to access the webcast)

Dial-in Details: Mainland China	[phone] or [phone]
Hong Kong, China	+852	3018 6768
Taiwan, China	+886	2 7703 1751
Singapore	[phone]
United States	[phone]
Conference ID: 5675625

Recording will be available at http://www.huahonggrace.com/s/investor_webcast.phpfor replay about 24 hours after the event, and will be valid for 12 months. (Replay password: Huahong)

About the Company

Hua Hong Semiconductor Limited ("Hua Hong Semiconductor", stock code: 1347.HK) ("the Company") is a global, leading pure-play foundry with specialty process platforms uniquely focused on embedded non-volatile memory ("eNVM"), power discrete, analog & power management, and logic & RF. Of special note is the Company's outstanding quality control system that satisfies the strict requirements of automotive chip manufacturing. The Company is part of the Huahong Group, an enterprise group whose main business is IC manufacturing, with advanced "8+12" production line technology.

The Company presently operates three 8-inch wafer fabrication facilities within the Huahong Group (HH Fab1, HH Fab2, and HH Fab3) in Jinqiao and Zhangjiang, Shanghai, with a total monthly 8-inch wafer capacity of approximately 180,000 wafers. The Company also operates a 12-inch wafer fabrication facility (HH Fab7) with the planned monthly capacity of forty thousand 12-inch wafers in Wuxi's National High-Tech Industrial Development Zone. Formal incorporation of and start of operations at HH Fab7 were achieved in 2019. In the Chinese mainland, it has become a leading 12- inch semiconductor production line devoted to specialty processes and is the first 12-inch foundry devoted to power discrete semiconductors.

For more information, please visit: www.huahonggrace.com

3

Summary of Operating Results

(Amounts in US$ thousands, except for EPS and operating data)

	2Q 2020	2Q 2019	1Q 2020	YoY	QoQ
	(Unaudited)	(Unaudited)	(Unaudited)	Change	Change
Revenue	225,350	230,037	202,854	(2.0)%	11.1 %
Cost of sales	(166,840)	(158,614)	(160,132)	5.2 %	4.2 %
Gross profit	58,510	71,423	42,722	(18.1)%	37.0 %
Gross margin	26.0 %	31.0 %	21.1 %	(5.0)	4.9
Operating expenses	(62,512)	(35,352)	(71,462)	76.8 %	(12.5)%
Other income net	12,000	24,616	20,043	(51.3)%	(40.1)%
Profit before tax	7,998	60,687	(8,697)	(86.8)%	(192.0)%
Income tax (expense) / credit	(6,737)	(10,793)	11,442	(37.6)%	(158.9)%
Profit for the period	1,261	49,894	2,745	(97.5)%	(54.1)%
Net profit margin	0.6 %	21.7%	1.4 %	(21.1)	(0.8)
Attributable to:
Owners of the parent	17,826	43,360	20,314	(58.9)%	(12.2)%
Non-controlling interests	(16,565)	6,534	(17,569)	(353.5)%	(5.7)%
Earnings per share attributable to
owners of the parent
Basic	0.014	0.034	0.016	(58.8)%	(12.5)%
Diluted	0.014	0.033	0.016	(57.6)%	(12.5)%
Wafers shipped	523	489	463	7.0 %	13.0 %
(in thousands 8" equivalent wafers)
Capacity utilization1	93.4 %	93.2 %	82.4 %	0.2	11.0
ROE2	3.2 %	8.0 %	3.6 %	(4.8)	(0.4)

Second Quarter 2020

• Revenue reached US$225.4 million, 2.0% lower than the prior year, primarily due to decreased average selling price, partially offset by increased wafer shipments, but 11.1% over 1Q 2020, mainly due to increased wafer shipments.
• Cost of sales was US$166.8 million, 5.2% above 2Q 2019, mainly due to increased wafer shipments, and 4.2% over 1Q 2020, primarily due to increased wafer shipments, partially offset by lower labor expenses.
• Gross margin was 26.0%, 5.0 percentage points below 2Q 2019, mainly due to decreased average selling price and change in product mix, and 4.9 percentage points above 1Q 2020, mainly due to improved capacity utilization and lower labor costs.
• Operating expenses were US$62.5 million, 76.8% above 2Q 2019, largely due to increased development cost and depreciation expenses for Wuxi fab, and 12.5% below 1Q 2020, primarily due to lower labor and development costs.
• Other income net was US$12.0 million, 51.3% lower year over year, primarily due to (i) foreign exchange loss versus a gain in 2Q 2019 and (ii) decreased fair value gains on financial assets at fair value through profit or loss and interest income, partially offset by increased share of profit of an associate, and 40.1% lower quarter over quarter, mainly due to decreased government subsidies.
• Income tax expense was US$6.7 million, 37.6% lower than 2Q 2019, primarily due to decreased taxable profit.
• Profit for the period was US$1.3 million, compared to US$49.9 million in 2Q 2019 and US$2.7 million in 1Q 2020.
• Net profit attributable to shareholders of the parent company was US$17.8 million, compared to US$43.4 million in 2Q 2019 and US$20.3 million in 1Q 2020.
• Basic earnings per share was US$0.014, compared to US$0.034 in 2Q 2019 and US$0.016 in 1Q 2020.
• ROE (annualized) was 3.2%.

1The capacity utilization is calculated based on average monthly equivalent wafers output divided by total estimated monthly capacity. 2Profit attributable to owners of the parent / weighted average net assets attributable to owners of the parent.

4

Operating Results by Segment

(Amounts in US$ thousands, except for operating data)

	2Q 2020	2Q 2019	1Q 2020	YoY	QoQ
	(Unaudited)	(Unaudited)	(Unaudited)	Change	Change
Hua Hong 8"
Revenue	215,862	230,037	200,572	(6.2)%	7.6 %
Gross profit	59,711	71,423	42,320	(16.4)%	41.1 %
Gross margin	27.7 %	31.0 %	21.1 %	(3.3)	6.6
Operating expenses	(26,342)	(28,002)	(29,098)	(5.9)%	(9.5)%
Profit before tax	41,804	47,353	27,157	(11.7)%	53.9 %
EBITDA	74,371	80,272	60,036	(7.4)%	23.9 %
EBITDA margin	34.5 %	34.9 %	29.9 %	(0.4)	4.6
Wafers shipped	501	489	460	2.5 %	8.9 %
(in thousands 8" wafers)
Hua Hong Wuxi
Revenue	9,488	-	2,282	N/A	315.8 %
Gross profit	(1,201)	N/A	402	N/A	(398.8)%
Gross margin	(12.7)%	N/A	17.6 %	N/A	(30.3)
Operating expenses	(36,170)	(7,350)	(42,364)	392.1 %	(14.6)%
Profit before tax	(33,806)	13,334	(35,854)	(353.5)%	(5.7)%
EBITDA	(18,493)	13,334	(22,800)	(238.7)%	(18.9)%
EBITDA margin	(194.9)%	N/A	(999.1)%	N/A	804.2
Wafers shipped	22	-	3	N/A	633.3 %
(in thousands 8"equivalent wafers)

Hua Hong 8"

• Revenue was US$215.9 million, 6.2% below 2Q 2019, primarily due to decreased average selling price, partially offset by increased wafer shipments, and 7.6% over 1Q 2020, mainly due to increased wafer shipments.
• Gross margin was 27.7%, 3.3 percentage points below 2Q 2019, mainly due to decreased average selling price and change in product mix, partially offset by improved capacity utilization, and 6.6 percentage points above 1Q 2020, mainly due to improved capacity utilization and lower labor cost.
• Operating expenses were US$26.3 million, 5.9% below 2Q 2019, primarily due to RMB depreciation and decreased development expenses, and 9.5% lower than 1Q 2020, primarily due to lower labor and development costs.
• Profit before tax was US$41.8 million, compared to US$47.4 million in 2Q 2019 and US$27.2 million in 1Q 2020.

Hua Hong Wuxi

• Revenue was US$9.5 million, 4 times more than the prior quarter.
• Operating expenses were US$36.2 million, compared to US$7.4 million in 2Q 2019, largely due to increased development and depreciation expenses, and $42.4 million in 1Q 2020, mainly due to decreased development and labor expenses.
• Profit before tax was minus US$33.8 million.
• EBITDA was minus US$18.5 million, US$4.3 million more favorable than 1Q 2020.

5

		Analysis of Revenue
Revenue by	2Q 2020	2Q 2020	2Q 2019	2Q 2019	YoY	YoY
service type	US$000	%	US$000	%	Change	Change
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	US$000	%
Wafers	216,291	96.0%	225,012	97.8%	(8,721)	(3.9)%
Others	9,059	4.0%	5,025	2.2%	4,034	80.3 %
Total revenue	225,350	100.0%	230,037	100.0%	(4,687)	(2.0)%

• 96.0% of total revenue was derived from the sale of semiconductor wafers in 2Q 2020.

		Analysis of Revenue
Revenue by	2Q 2020	2Q 2020	2Q 2019	2Q 2019	YoY	YoY
wafer size	US$000	%	US$000	%	Change	Change
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	US$000	%
8" wafers	215,862	95.8%	230,037	100.0%	(14,175)	(6.2)%
12" wafers	9,488	4.2%	-	-	9,488	N/A
Total revenue	225,350	100.0%	230,037	100.0%	(4,687)	(2.0)%

• Revenues for 8" wafers and 12" wafers were US$215.9 million and US$9.5 million, respectively, in 2Q 2020.

6

Analysis of Revenue

Revenue by	2Q 2020	2Q 2020	2Q 2019	2Q 2019	YoY	YoY
geography	US$000	%	US$000	%	Change	Change
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	US$000	%
China3	137,558	61.0%	127,335	55.4%	10,223	8.0 %
United States	33,758	15.0%	42,042	18.3%	(8,284)	(19.7)%
Asia4	28,560	12.7%	28,041	12.2%	519	1.9 %
Europe	19,089	8.5%	18,246	7.9%	843	4.6 %
Japan5	6,385	2.8%	14,373	6.2%	(7,988)	(55.6)%
Total revenue	225,350	100.0%	230,037	100.0%	(4,687)	(2.0)%

• Revenue from China was US$137.6 million, contributing 61.0% of total revenue and an increase of 8.0% compared to 2Q 2019, mainly driven by increased demand for logic products.
• Revenue from United States was US$33.8 million, a decrease of 19.7% compared to 2Q 2019, mainly due to decreased demand for general MOSFET and super junction products, partially offset by increased demand for MCU products.
• Revenue from Asia was US$28.6 million, an increase of 1.9% compared to 2Q 2019, chiefly driven by increased demand for MCU products, partially offset by decreased demand for general MOSFET and logic products.
• Revenue from Europe was US$19.1 million, an increase of 4.6% compared to 2Q 2019, chiefly driven by increased demand for smart card ICs.
• Revenue from Japan was US$6.4 million, a decrease of 55.6% compared to 2Q 2019, mainly due to decreased demand for logic and MCU products.

3Includes Hong Kong.

4Excludes China and Japan.

5Includes a major customer in Japan that was acquired by a U.S. headquartered company in 2013.

7

Analysis of Revenue

Revenue by	2Q 2020	2Q 2020	2Q 2019	2Q 2019	YoY	YoY
technology	US$000	%	US$000	%	Change	Change
platform	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	US$000	%
eNVM	76,866	34.1%	79,583	34.6%	(2,717)	(3.4)%
Discrete	86,779	38.5%	92,487	40.2%	(5,708)	(6.2)%
Analog & PM	31,555	14.0%	33,371	14.5%	(1,816)	(5.4)%
Logic & RF	26,712	11.9%	21,606	9.4%	5,106	23.6 %
Standalone NVM	3,155	1.4%	2,709	1.2%	446	16.5 %
Others	283	0.1%	281	0.1%	2	0.7 %
Total revenue	225,350	100.0%	230,037	100.0%	(4,687)	(2.0)%

• Revenue from eNVM was US$76.9 million, a decrease of 3.4% compared to 2Q 2019, primarily due to decreased demand for smart card ICs, partially offset by increased demand for MCU products.
• Revenue from discrete was US$86.8 million, a decrease of 6.2% compared to 2Q 2019, mainly due to decreased demand for super junction, partially offset by increased demand for IGBT products.
• Revenue from analog & power management was US$31.6 million, a decrease of 5.4% compared to 2Q 2019, mainly due to decreased demand for LED lighting and analog products, partially offset by increased demand for other PMIC products.
• Revenue from logic & RF was US$26.7 million, an increase of 23.6% compared to 2Q 2019, largely driven by increased demand for logic products, partially offset by decreased demand for RF products.
• Revenue from Standalone NVM was US$3.2 million, an increase of 16.5% compared to 2Q 2019, primarily due to increased demand for EEPROM products.

8

Analysis of Revenue

Revenue by	2Q 2020	2Q 2020	2Q 2019	2Q 2019	YoY	YoY
process	US$000	%	US$000	%	Change	Change
technology node	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	US$000	%
≤0.13µm	76,322	33.9%	73,783	32.1%	2,539	3.4 %
0.15µm & 0.18µm	33,971	15.1%	25,155	10.9%	8,816	35.0 %
0.25µm	4,009	1.8%	2,133	0.9%	1,876	88.0 %
≥0.35µm	111,048	49.2%	128,966	56.1%	(17,918)	(13.9)%
Total revenue	225,350	100.0%	230,037	100.0%	(4,687)	(2.0)%

• Revenue from 0.13µm and lower technology nodes was US$76.3 million, an increase of 3.4% versus 2Q 2019, chiefly driven by increased demand for MCU and logic products, partially offset by smart card ICs.
• Revenue from the 0.15µm & 0.18µm technology nodes was US$34.0 million, an increase of 35.0% from 2Q 2019, mainly driven by increased demand for MCU, analog and logic products.
• Revenue from the 0.25µm technology node was US$4.0 million, an increase of 88.0% from 2Q 2019, primarily driven by increased demand for logic products.
• Revenue from 0.35µm and above technology nodes was US$111.0 million, a decrease of 13.9% compared to 2Q 2019, primarily due to decreased demand for super junction, smart card ICs and analog products.

Analysis of Revenue

Revenue by		2Q 2020	2Q 2020	2Q 2019	2Q 2019	YoY	YoY
end market		US$000	%	US$000	%	Change	Change
distribution	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	US$000	%
Consumer electronics	133,727	59.3%	147,160	64.0%	(13,433)	(9.1)%
Industrial & automotive 56,046	24.9%	44,285	19.3%	11,761	26.6 %
Communications	27,455	12.2%	28,134	12.2%	(679)	(2.4)%
Computing	8,122	3.6%	10,458	4.5%	(2,336)	(22.3)%
Total revenue		225,350	100.0%	230,037	100.0%	(4,687)	(2.0)%

• Revenue from consumer electronics, our largest end market segment, contributed US$133.7 million, reaching 59.3% of total revenue, a decrease of 9.1% compared to 2Q 2019, mainly due to decreased demand for smart card ICs.
• Revenue from industrial & automotive was US$56.0 million, an increase of 26.6% over 2Q 2019, primarily driven by an increased demand for MCU, analog, logic, smart card ICs and IGBT, partially offset by super junction products.
• Revenue from communications was US$27.5 million, a decrease of 2.4% compared to 2Q 2019, mainly due to decreased demand for smart card ICs and general MOSFET products, partially offset by increased demand for logic products.
• Revenue from computing was US$8.1 million, a decrease of 22.3% compared to 2Q 2019, mainly due to decreased demand for general MOSFET products.

9

Capacity6 and Capacity Utilization

Fab (in thousands wafers	2Q 2020	2Q 2019	1Q 2020
per month)	(Unaudited)	(Unaudited)	(Unaudited)
Fab 1 (200mm)	65	65	65
Fab 2 (200mm)	60	60	60
Fab 3 (200mm)	53	50	53
Fab 7 (300mm)	10	-	10
Total 8" equivalent wafers	201	175	201
Capacity utilization (200mm)	100.4%	93.2%	91.9%
Capacity utilization (300mm)	38.3%	-	6.9%
Overall capacity utilization	93.4%	93.2%	82.4%

• Monthly capacity was 201,000 8-inch equivalent wafers at the end of 2Q 2020. Overall capacity utilization was 93.4% in 2Q 2020, 11.0 percentage points above 1Q 2020.

Wafer Shipments

in thousands 8"	2Q 2020	2Q 2019	1Q 2020	YoY	QoQ
equivalent wafers	(Unaudited)	(Unaudited)	(Unaudited)	Change	Change
Wafer shipments	523	489	463	7.0 %	13.0 %

• Wafer shipments were 523,000, an increase of 7.0% year over year, and 13.0% quarter over quarter.

Operating Expenses Analysis

Amounts in US$ thousands	2Q 2020	2Q 2019	1Q 2020	YoY	QoQ
	(Unaudited)	(Unaudited)	(Unaudited)	Change	Change
Selling and distribution expenses	1,925	1,979	2,301	(2.7)%	(16.3)%
Administrative expenses7	60,587	33,373	69,161	81.5 %	(12.4)%
Operating expenses	62,512	35,352	71,462	76.8 %	(12.5)%

• Operating expenses were US$62.5 million, 76.8% above 2Q 2019, largely due to increased development and depreciation expenses for Wuxi fab, and 12.5% below 1Q 2020, primarily due to lower labor and development costs.

6 Wafers per month at the end of the period, calculated on a 30-day basis for comparison purposes. 7Administrative expenses include government grants recognized as an offset item.

10

	Other Income Net Analysis
Amounts in US$ thousands	2Q 2020	2Q 2019	1Q 2020	YoY	QoQ
	(Unaudited)	(Unaudited)	(Unaudited)	Change	Change
Rental income	3,071	3,225	3,098	(4.8)%	(0.9)%
Interest income	2,960	5,661	2,710	(47.7)%	9.2 %
Fair value gains on financial assets	1,658	7,627	3,454	(78.3)%	(52.0)%
at fair value through profit or loss
Foreign exchange (loss) / gain	(361)	7,589	1,352	(104.8)%	(126.7)%
Share of profit of an associate	4,362	627	2,896	595.7 %	50.6 %
Finance costs	(301)	(309)	(317)	(2.6)%	(5.0)%
Government subsidies	453	82	6,607	452.4 %	(93.1)%
Others	158	114	243	38.6 %	(35.0)%
Other income net	12,000	24,616	20,043	(51.3)%	(40.1)%

• Other income net was US$12.0 million, 51.3% lower year over year, primarily due to (i) foreign exchange loss versus a gain in 2Q 2019 and (ii) decreased fair value gains on financial assets at fair value through profit or loss and interest income, partially offset by increased share of profit of an associate, and 40.1% lower quarter over quarter, mainly due to decreased government subsidies.

Cash Flow Analysis

Amounts in US$ thousands	2Q 2020	2Q 2019	1Q 2020	YoY	QoQ
	(Unaudited) (Unaudited)	(Unaudited)	Change	Change
Net cash flows generated from /	101,847	20,659	(6,639)	393.0 %	(1,634.1)%
(used in) operating activities
Net cash flows generated from /	81,493	(280,795)	51,368	(129.0)%	58.6 %
(used in) investing activities
Net cash flows (used in) / generated	(3,230)	(52,974)	1,662	(93.9)%	(294.3)%
from financing activities
Effect of exchange rate changes	545	(7,471)	(4,375)	(107.3)%	(112.5)%
Net change in cash	180,655	(320,581)	42,016	(156.4)%	330.0 %

• Net cash flows generated from operating activities were US$101.8 million, compared to US$20.7 million in 2Q 2019, largely due to receipts of VAT tax return.
• Net cash flows generated from investing activities were US$81.5 million, including (i) payout of US$187.0 million in investment in financial assets at fair value through profit or loss, (ii) payout of US$70.0 million in investment in time deposit, and (iii) US$2.6 million of interest income, partially offset by US$178.1 million of investment in fixed assets and intangible assets.
• Net cash flows used in financing activities were US$3.2 million, including (i) US$2.1 million of repayments of bank borrowings, (ii) US$1.1 million of lease payments, and (iii) US$0.1 million of interest expenses for bank borrowing, partially offset by US$0.1 million proceeds from share option exercise.

11

Capital Structure

Amounts in US$ thousands	30-Jun-2020	31-Mar-2020
	(Unaudited)	(Unaudited)
Total assets	3,575,890	3,540,298
Total liabilities	526,107	498,079
Total equity	3,049,783	3,042,219
Debt ratio8	14.7%	14.1%

Capital Expenditures

Amounts in US$ thousands	2Q 2020	1Q 2020
	(Unaudited)	(Unaudited)
Hua Hong 8"	33,272	31,409
Hua Hong Wuxi	144,801	169,141
Total	178,073	200,550

• Capital expenditures were US$178.1 million in 2Q 2020, including US$144.8 million for Wuxi fab.

8 Debt ratio is calculated based on total liabilities / total assets.

12

Liquidity

Amounts in US$ thousands	30-Jun-2020	31-Mar-2020
	(Unaudited)	(Unaudited)
Inventories	176,856	154,736
Trade and notes receivables	135,518	156,223
Prepayments, deposits and other receivables	66,174	133,057
Due from related parties	11,588	10,593
Financial assets at fair value through profit or loss	84,759	270,167
Restricted and time deposits	766	70,765
Cash and cash equivalents	698,957	518,302
Total current assets	1,174,618	1,313,843
Trade payables	92,607	95,510
Other payables, advances from customers and accruals	318,489	268,710
Interest-bearing bank borrowings	4,238	4,234
Lease liabilities	3,757	2,977
Government grants	40,105	40,017
Due to related parties	13,467	16,531
Income tax payables	14,292	31,431
Total current liabilities	486,955	459,410
Net working capital	687,663	854,433
Quick ratio	2.0x	2.5x
Current ratio	2.4x	2.9x
Trade and notes receivables turnover days	59	73
Inventories turnover days	89	83

• Inventories increased from US$154.7 million on 31 March 2020 to US$176.9 million on 30 June 2020, primarily due to increased raw materials and finished goods.
• Trade and notes receivables decreased from US$156.2 million on 31 March 2020 to US$135.5 million on 30 June 2020, mainly due to decreased revenue in 1Q 2020 as a result of COVID-19.
• Prepayments, deposits and other receivables decreased from US$133.1 million on 31 March 2020 to US$66.2 million on 30 June 2020, primarily due to receipts of VAT tax return.
• Financial assets at fair value through profit or loss decreased from US$270.2 million on 31 March 2020 to US$84.8 million on 30 June 2020, due to payout from investment in financial products.
• Restricted and time deposits decreased from US$70.8 million on 31 March 2020 to US$0.8 million on 30 June 2020, due to payout from investment in time deposits.
• Other payables, advances from customers and accruals increased from US$268.7 million on 31 March 2020 to US$318.5 million on 30 June 2020, primarily due to increased payables for capital expenditures.
• Income tax payables decreased from US$31.4 million on 31 March 2020 to US$14.3 million on 30 June 2020, primarily due to a payment of income tax for 2019.
• On 30 June 2020, net working capital was US$687.7 million and the current ratio was 2.4.
• Trade and notes receivables turnover days were 59.
• Inventories turnover days were 89.

Please visit Company's website at www.huahonggrace.com

for further details regarding recent announcements.

13

Hua Hong Semiconductor Limited

Condensed Consolidated Statements of Profit or Loss

(In US$ Thousands Except Share Data)

	For the Three Months Ended
	30-Jun-202030-Jun-201931-Mar-2020
	(Unaudited)	(Unaudited)	(Unaudited)
Revenue	225,350	230,037	202,854
Cost of sales	(166,840)	(158,614)	(160,132)
Gross profit	58,510	71,423	42,722
Other income and gains	8,303	24,302	17,464
Selling and distribution expenses	(1,925)	(1,979)	(2,301)
Administrative expenses	(60,587)	(33,373)	(69,161)
Other expenses	(364)	(4)	-
Finance costs	(301)	(309)	(317)
Share of profit of an associate	4,362	627	2,896
Profit before tax	7,998	60,687	(8,697)
Income tax (expense) /credit	(6,737)	(10,793)	11,442
Profit for the period	1,261	49,894	2,745
Attributable to:
Owners of the parent	17,826	43,360	20,314
Non-controlling interests	(16,565)	6,534	(17,569)
Earnings per share attributable to owners of parent
Basic	0.014	0.034	0.016
Diluted	0.014	0.033	0.016
Shares used in calculating basic earnings per share	1,291,439,564	1,285,237,562	1,290,612,948
attributable to owners of parent
Shares used in calculating diluted earnings per share	1,300,881,564	1,299,346,562	1,303,317,948
attributable to owners of parent

14

Hua Hong Semiconductor Limited

Condensed Consolidated Statements of Financial Position (In US$ Thousands)

		As of
	30-Jun-202031-Mar-202030-Jun-2019
	(Unaudited)	(Unaudited)	(Unaudited)
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment	1,790,860	1,659,799	1,037,724
Right-of-use assets	75,810	74,809	75,484
Investment property	166,154	166,023	170,939
Intangible assets	32,201	10,766	12,198
Investment in an associate	79,335	74,898	64,900
Equity instruments designated at fair value through	204,658	204,497	208,008
other comprehensive income
Long term prepayment	42,100	14,721	90,270
Due from related parties	1,994	13,629	6,908
Deferred tax assets	8,160	7,313	7,429
Total non-current assets	2,401,272	2,226,455	1,673,860
CURRENT ASSETS
Inventories	176,856	154,736	139,128
Trade and notes receivables	135,518	156,223	147,771
Prepayments, deposits and other receivables	66,174	133,057	72,067
Due from related parties	11,588	10,593	4,366
Financial assets at fair value through profit or loss	84,759	270,167	658,306
Restricted and time deposits	766	70,765	14,724
Cash and cash equivalents	698,957	518,302	834,678
Total current assets	1,174,618	1,313,843	1,871,040
CURRENT LIABILITIES
Trade payables	92,607	95,510	76,966
Other payables, advanced from customers and accruals	318,489	268,710	267,047
Interest-bearing bank borrowings	4,238	4,234	4,364
Lease liabilities	3,757	2,977	1,381
Government grants	40,105	40,017	55,335
Due to related parties	13,467	16,531	12,688
Income tax payable	14,292	31,431	18,908
Total current liabilities	486,955	459,410	436,689
NET CURRENT ASSETS	687,663	854,433	1,434,351
TOTAL ASSETS LESS CURRENT LIABILITIES	3,088,935	3,080,888	3,108,211
Non-current liabilities
Interest-bearing bank borrowings	19,069	21,171	24,001
Lease liabilities	16,889	15,837	16,653
Deferred tax liabilities	3,194	1,661	8,203
Total non-current liabilities	39,152	38,669	48,857
Net assets	3,049,783	3,042,219	3,059,354
Equity and liabilities capital and reserves
Share capital	1,971,748	1,968,961	1,961,742
Reserves	286,489	265,907	234,763
Equity attributable to the owners of the company	2,258,237	2,234,868	2,196,505
Non-controlling interests	791,546	807,351	862,849
Total equity	3,049,783	3,042,219	3,059,354
			15

Hua Hong Semiconductor Limited

Condensed Consolidated Statement of Cash Flows (In US$ Thousands)

	For the Three Months Ended
	30-Jun-202030-Jun-201931-Mar-2020
	(Unaudited)	(Unaudited)	(Unaudited)
Cash flows from operating activities:
Profit / (loss) before tax	7,998	60,687	(8,697)
Depreciation and amortization	47,579	32,610	45,616
Share of profit of an associate	(4,362)	(627)	(2,896)
Changes in working capital and others	50,632	(72,011)	(40,662)
Net cash flows generated from / (used in)	101,847	20,659	(6,639)
operating activities
Cash flows from investing activities:
Payments for property, plant and equipment and	(178,073)	(223,053)	(200,550)
intangible assets
Other cash flow generated from / (used in)	259,566	(57,742)	251,918
investing activities
Net cash flows generated from / (used in)	81,493	(280,795)	51,368
investing activities
Cash flows from financing activities:
Proceeds from issue of shares	17	537	3,817
Dividends paid to shareholders	-	(37,042)	-
Increase in restricted deposits	-	(13,943)	-
Repayment of bank borrowings	(2,119)	(2,182)	-
Payment of lease liabilities	(1,050)	(249)	(2,078)
Interest paid	(78)	(95)	(77)
Net cash flows (used in) / generated from	(3,230)	(52,974)	1,662
financing activities
Net increase / (decrease) in cash and cash equivalents	180,110	(313,110)	46,391
Effects of exchange rate changes	545	(7,471)	(4,375)
Cash and cash equivalents, beginning of period	518,302	1,155,259	476,286
Cash and cash equivalents, ending of period	698,957	834,678	518,302

As of the date of this announcement, the directors of the Company are:

Executive Directors

Suxin Zhang (Chairman)

Junjun Tang (President)

Non-Executive Directors

Yang Du

Takayuki Morita

Jing Wang

Jun Ye

Independent Non-Executive Directors

Stephen Tso Tung Chang

Kwai Huen Wong, JP

Long Fei Ye

By order of the Board

Hua Hong Semiconductor Limited

Mr. Suxin Zhang

Chairman and Executive Director

Hong Kong SAR, PRC

August 11, 2020

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